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Steve Allen of VAT Advisers Limited explains the basics of Intrastat

An important declaration? - Yes and no

Intrastat was introduced as a means of gathering statistics on the movement of goods between EU Member States in 1993 when the old import/export rules on EU trade were removed. Although Intrastat is only a means of gathering statistics and does not affect the amount of VAT collected, failure to comply with the Intrastat regulations is classed as a criminal offence and can result in punishment by a heavy fine. So although Intrastat may not seem important to you, it is to the Government, European Union, United Nations agencies and, in fact, many businesses.

Is Intrastat Compulsory?

Intrastat statistics are collected by the Customs and International (Trade Statistics) Branch (C&I) of HM Revenue & Customs. Initially data is collected solely from the values declared in boxes 8 and 9 of the VAT return but over a certain threshold (which can change annually) businesses are required to submit a more detailed form known as an Intrastat Supplementary Declaration (SD).

C&I monitor the trade values you declare in boxes 8 and 9 of the VAT return and write to you if it looks as though you are about to exceed the threshold. They will allow you a limited amount of leeway if you are late notifying them of your liability to submit returns, but will require all missed SDs to be submitted.  If you miss submitting the (very) occasional SD you will probably only get a warning letter and you will still have to submit the missed SD. If you are more reckless and continually fail to submit SDs (or make persistent, similar errors), C&I will put you into the ‘Penalty Regime’. This may result in an administrative fine, or, in serious cases, action in a magistrate’s court.  In effect you agree to pay a fine set by C&I in return for C&I not prosecuting you in court. (Sometimes known as a 'compound penalty').

If you ignore C&I’s warnings, they will prosecute you under the criminal law and you could find yourself in front the bench at Southend Magistrates Court (if your business is registered in England or Wales). Our information tells us that the magistrates take a dim view of non-compliance with the Intrastat regulations and are inclined  to impose substantial fines, which most businesses could well do with avoiding in the current economic climate! The maximum penalty is currently £2,500 per offence, so if you have not sent in your last four returns you could be landed with a bill for £10,000! The Government really do take their statistics seriously!

Who has to make declarations?

Threshold

If your annual Arrivals (purchases) or Dispatches (supplies) from, or to the other EU Member States exceed the annual threshold (currently £270,000) you will have to start submitting SDs from the month during which you exceeded the threshold. This applies to trade in goods and related services (e.g. transport and insurance charges) only. All other services and certain types of goods trade (e.g. goods sent for or received after repair) are excluded, as is trade with non-EU countries.

For arrivals or dispatches?

There are separate forms and thresholds for each trade ‘flow’, so you may have to submit arrivals SDs but not dispatches, or the other way round (or both if you are unlucky).

Tip 1

Have a look at boxes 8 and 9 of your VAT returns. If the annual totals (using the calendar year) for either exceed the threshold (currently £270,000 for each trade 'flow') you will have to start sending in SDs. Contact Customs’ National Advice Service on 0845 010 9000 and ask them to supply you with the appropriate form(s). If you choose to use paper declarations, you will have to request a supply each time you need them. SDs are not sent out automatically like the VAT return. You should register as an Intrastat declarant with C&I, although in reality, they will probably do it for you and send you an information pack.

When do I have to start making declarations?

If the value of your Arrivals or Dispatches (or both) exceed the annual threshold during the calendar year (i.e., starting from 1 January), you must start submitting SDs from the beginning of the month in which you exceeded the threshold.

If your Arrivals/Dispatches in one calendar year turn out to have exceeded the (usually slightly higher) threshold set for the following year as well, then you will have to send in SDs for the whole of next year too, even if the level of trade falls below the threshold during that year. Special arrangements can be made if your EU trade dries up completely.

In either case, you must continue submitting SDs until the end of the current calendar year. You can only stop submitting SDs if your total trade in a year falls below the threshold set for the following year.

How often?

You have to submit your SDs on a monthly basis and they  must reach C&I by the end of the month following the month in which the goods arrived or were dispatched. Remember, if you have no trade in a particular month, you do not have to submit SDs, however, it might avoid a ‘phone call asking where your SD is if you submit a ‘nil’ return.

Tip 2

You can submit your SDs by either using the paper forms, C1500 (arrivals) and C1501 (dispatches), EDI or via the Internet, probably the most popular and flexible method on offer.

Internet submission offers two alternatives, completion online (like filling in a paper SD), or if you have a lot of trade, by using the CSV file option. Either method has a number of helpful features and, of course, submitting a ‘nil’ return is simple.

Commodity codes?

Special codes

Every product from a spacecraft to a bale of wool has its own commodity code and you need to use the right code on the form. Fortunately C&I supplies you with a book of all the codes, the Intrastat Classification Nomenclature (ICN), but make sure you have enough room to store it! The alternative is the online edition of the ICN which is a fully searchable electronic version you can find at www.uktradeinfo.com.

If you have to complete arrivals SDs you can ask your supplier to quote the commodity code*. It may help things for you but always remember to check the code before you use it. Your supplier may have simply guessed and it’s your responsibility to declare the correct code – C&I won’t chase the supplier! If you are the supplier, quoting the commodity code on your sales invoice can make it easier for your buyer to complete their SD, but there’s no guarantee that the authorities in their Member State will agree with your choice.

Remember – whoever completes your SD, dispatches or arrivals, you, as the VAT registered trader are responsible in law for whatever is submitted on the form. You can’t blame a duff commodity code on your supplier or agent!

* There is no legal obligation to quote commodity code numbers on an invoice, although some purchasers may insist on it as part of the sales contract. Whilst there is some administrative support for sellers to quote commodity codes on dispatch invoices, most consider it a slightly dangerous practice, given the varied product interpretations and language differences within the EU.